Finance Committee on Oct. 21st, 2014

[Bruce MacDonald]

I'm not sure consensus is the word I would use. There's strong, strong support, absolutely. It has really been interesting to see the range of charities that are stepping up to support this and contacting their members of Parliament, I would say, across subsectors and across geographic regions, and definitely across organizational size. It has been really fascinating to see. This is a universal measure that seems to appeal to them.

In terms of cost, we asked our chief economist to put his mind—he's here actually, if you want to have a chat later on. Right now he's estimating it would boost another incent of about $234 million in giving on top of a potential natural increase of $170 million. That would be a total of just over $400 million in new gifts, and if you apply the finance department methodology that was used in costing the super credit, that would amount to a cost of around $40 million a year.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

It's about $40 million a year.

That's fine, Chair.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Allen.

Mr. Caron, you have the floor for seven minutes.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Mr. Chair.

My thanks also go to all the participants for being here with us today.

Mr. Dillon, I am going to start with you, but I am going to go in a slightly different direction.

One of your recommendations dealt with Farm Credit Canada. Do you believe that Farm Credit Canada's activities compete with those of credit unions?

[Eric Dillon]

I am sorry. I'm not getting any translation, Mr. Chair.

[The Chair, Conservative, James Rajotte]

I think it's on channel one. Are you on channel one?

[Eric Dillon]

Yes, thank you.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you. So I will ask my question again.

One of your recommendations dealt with Farm Credit Canada. Do you believe that Farm Credit Canada is currently in direct competition with credit unions, and if so, to what extent?

[Eric Dillon]

Yes. We would suggest Farm Credit is a very direct competitor with those people who are active in farm finance. In fact, the way Farm Credit is structured today in terms of the risk profile of the credits and the business they typically write, it would be the lowest best profile, and in some cases what we would call the most attractive, where there is the most active market from other institutions like credit unions to finance that business. Very much so, they are an active and direct competitor.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Ideally, you would like Farm Credit Canada's role to complement the role of institutions such as credit unions.

What modifications would be needed to make that complementary role a reality?

[Eric Dillon]

What we've asked for historically is that there be a mandate review, for instance, where Farm Credit and the credit union system could come together to actually cooperate in serving Canada's farmers. For instance, Farm Credit doesn't provide businesses around wealth management or succession. Credit unions are very active in that business, so why wouldn't we want to approach those people together to ensure there's an orderly transition of farm wealth from one family to the next, because generally that's how it happens. However, it doesn't appear there's any appetite on behalf of Farm Credit to approach farm members and farm clients in that way.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Were you under the impression that a program review like that was likely to happen?

[Eric Dillon]

We were hopeful, yes.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Yes.

It was one of the main recommendations, but it has not become a reality.

Let me play the devil's advocate for a moment.

Suppose I am a farmer and I have to choose between a credit union and Farm Credit Canada. Since it is a competitive situation, perhaps I will be able to get better service. Why is competition between your two organizations not an advantage, in terms of financing, for the agricultural sector in general?

[Eric Dillon]

That's a very complex question. How I would answer that is to say I think there is a very mature credit market in Canada that understands risk. In our case, we've been in the farm finance business, as I said earlier, for 75 years. I'm not sure there's a necessity for government to play a role in financing those activities where there's not an active market between either banks or credit unions.

As I said earlier, I think if you look at CFIB data, which does include agrifood businesses, credit unions are very competitive with price, so I'm not sure there would be a material loss to farmers, if you will, if that were the case.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

If I understand correctly, to use an analogy, you feel that the role of Farm Credit Canada should be complementary, a little like the Business Development Bank of Canada complements the activities of the general banking sector.

[Eric Dillon]

We do. We see it being very analogous to the role BDC plays, as well as EDC, Export Development Canada.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Okay. Thank you very much.

Now I would like to talk to Mr. Cockfield and Mr. Moffat.

I think that this has already been discussed, but I would like to deal with the issue of simplifying the system.

Not too long ago, the Income Tax Act was 2,300 pages long. Then 900 pages of recommendations from the Canada Revenue Agency were added, making a total of about 3,000 pages. If I am not mistaken, the first Income Tax Act had a dozen or so pages. So it has expanded very quickly.

Let me start with you, Mr. Moffat.

One of the things you mentioned was a variety of tax credits, boutique tax credits, as my colleague called them. It is more than that. If we are talking about simplification, given that the Income Tax Act is 3,000 pages long, it is not just a question of tax credits. There is something much broader, related to the complexity of the tax system. I do not wish to diminish your proposal, but do you not feel that any correction to the act that your proposal would make would be only a minor one?

[Mike Moffat]

I think that's a fair comment.

I think what's needed is, as my colleague suggested, to have a large analysis of the system as a whole and go through all of these things and see what has become out of date. I think it's analogous to the tariff code, where there are tariffs in the system designed to protect domestic industries that no longer exist. I think that if we went through the Income Tax Act we would find a number of provisions that may have made sense in 1960 or 1970 but no longer make sense today.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Cockfield, should we go further? Can we limit ourselves to studying only tax credits in the context of simplification?

[Prof. Arthur Cockfield]

I think it is possible.

Again, I recall that the last time this was done with some success was during the Mulroney government in the late 1980s. They did feel significant fiscal pressure at that time, but maybe governments no longer do, so it was a powerful political motivator. I think politicians are also aware that the next year, in 1988, the Tories introduced the GST and arguably paid a heavy political price, and that may be weighing on the minds of some individuals to this day. But it does show that you can make progress with respect to simplification, with respect to broadening the tax base, which makes it fairer and more efficient for all Canadians. Again, if you could strike a permanent body to examine this in detail, I think that would be the best route forward.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you.

[The Chair, Conservative, James Rajotte]

You have about 20 seconds.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

So let me ask a question in the hope that I will get the answer later.

Mr. Moffat, you mentioned importers and that tariff are an obstacle. There is also the problem of reciprocity. A little later, could you comment on possible reciprocity if we eliminate tariffs on some export products? Our exporters will not automatically see the same tariffs being eliminated. If you have the chance, I would like to perhaps get an answer to that later.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Van Kesteren, please.